The Federal Court has found a Perth-based company took part in an illegal pyramid selling scheme following an investigation by the Australian Competition and Consumer Commission.
The selling scheme, known as Emerald Passport, is an international scam that was created by a company in Panama. It promoted self-help products such as internet-based audio visual presentations with promising titles such as “Mastering Money” and “Wealth Fundamentals”.
Under the scheme, participants made an annual payment to Emerald Passport Inc on the basis that they could earn between $US1,000 to $US10,000 each time they introduced a new participant to the scheme. As per the classic pyramid selling model, they would also earn “commissions” from people that the new participants subsequently introduced.
The Federal Court in Perth found Cosic Holdings Pty Ltd had breached the Trade Practices Act 1974 by taking part in the scheme. The court found the company set up and controlled websites relating to the scheme, promoted scheme by advertising and made and received payments from other participants in the scheme.
The court also declared that the company’s director, John Cosic, was a party to Cosic Holdings’ contravention.
“People are attracted to these schemes by the prospect of earning quick money through recruiting others into the scheme,” ACCC chairman Graeme Samuel said in a statement.
“Success depends on the number of people they can recruit, and in turn on the number those below them can recruit. Ultimately pyramid schemes must fail as it becomes harder and harder for participants down the chain to recruit people. Inevitably people will lose their money.
“Pyramid selling schemes are nothing more than scams. These proceedings should act as a warning to people promoting or participating in schemes of this nature that the ACCC will take strong enforcement action to stop the promotion of such schemes.”
Cosic Holdings has been banned by the court from taking part in similar schemes and has order to publish notices in various newspapers. Cosic has also been ordered to pay the ACCC’s costs.
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
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